Think about your LLC a year from now: raking in profits and taking Massachusetts by storm. You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees – before you sell a single product, there are startup costs associated with launching an LLC in Massachusetts.
While you’re making plans and dreaming big, make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Massachusetts startup fees here.
Quick Note: If you’d like to keep your costs of starting an LLC as simple and low as possible, consider hiring ZenBusiness – a reliable business formation service. To get a better idea of the value they offer and how it works, we compared them to the two most well known services:
Bare Minimum Cost to Start an LLC in Massachusetts
- Optional: LLC Name Reservation Fee
- $30 for a hard copy application
- Required: Certificate of Organization Fee
- $500 for mailed filings and $520 for online or faxed ones
Overall Massachusetts LLC Formation Costs
LLC Name Reservation Fee
Do you have a business name in mind, but you’re not ready to use it? You might think about protecting it by filing a name reservation. Reserving a business name isn’t a prerequisite for forming an LLC, but it’s a nice option to have. It costs $30 to reserve a name for 60 days. After that, you can renew it for another $30. But if your business is ready to go, it will save you money to file your Certificate of Organization right away, since that automatically registers your name with the state.
Certificate of Organization Fee
This is the big one, the most important (and most expensive) form that you’ll file to start your Massachusetts LLC. The Certificate of Organization is what officially puts your business on record with the Secretary of the Commonwealth. But it’s not cheap. The filing fee is $500 by mail and $520 if you’re submitting it online or by fax. The good news is that you only need to file the Certificate of Organization once, so as long as it’s accepted, you won’t have to pay it again.
Business and Professional Licenses
You filed your Certificate of Organization, but don’t go conducting business just yet. Your LLC may need to acquire certain licenses first. This all depends on your location and the type of business you’re doing. For example, barbers and cosmetologists need to apply for licensure with the Board of Cosmetology and Barbering Services Administration. Take a look at the Division of Professional Licensure page to see which business types need licenses. Additionally, your city and/or county may have separate licensure requirements, so be sure to also check with your local government.
LLC Formation Service
Starting an LLC can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for an LLC formation service. These services take care of the registration process for you, so you don’t have to spend the time on research, paperwork, and filings.
Most of these services (like ZenBusiness and Northwest) offer basic LLC formation service like Articles of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, Operating Agreements, and expedited filing.
Resident Agent Service
Appointing a resident agent is an important part of your LLC formation process. Your resident agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with Massachusetts business law. In short, you need an agent you can trust.
While you can be the resident agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional. A resident agent service ensures that your annual reports and other forms are filed efficiently and on-time, saving you from the penalties of delinquent filings and the stress of having to do it yourself.
Not all resident agent services are equal, so you’ll need to be careful in choosing one. Fortunately, we’ve done some research for you, and we recommend Northwest Registered Agent. In addition to resident agent services, Northwest also handles LLC formation — and they’ll include a resident agent free for one year when you form your business with them. We think they’re the most reliable choice, but if you’d like to evaluate all your options, check out our Best Resident Agent Services guide.
If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind.
Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that. On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2000.
Cost variations depend on the experience and location of the lawyer. But to ensure that you find a good fit, you’ll need to do some research. Search, compare, and contact business lawyers on a site like Avvo, which provides access to an entire database of attorneys, including Massachusetts business attorneys. It allows you to sort by their locations, rates, specialties, and more, helping you narrow down your options.
Foreign Qualification Fee
This only applies if your LLC was formed in another state and is now expanding into Massachusetts. Foreign LLCs don’t need to file the Certificate of Organization; instead, they must submit an “Application for Registration.”
All foreign business entities are required to foreign qualify in Massachusetts, or they could incur some pretty severe penalties. Like the Certificate of Organization, the Application for Registration is somewhat expensive: $500. But also like the Certificate of Organization, you only need to file it once.
LLC Annual Fees
Some LLC expenses only relate to starting the business, like the Certificate of Organization or the name reservation fees. Others are recurring, namely the Annual Report. Every year, Massachusetts LLCs must file an Annual Report to keep the state updated on their most current information. Each of these reports costs $500 for mailed forms and $520 for online or faxed ones, so make sure you write it into your annual budget.
There are only particular circumstances that would cause your LLC to pay taxes in Massachusetts. Federally, LLCs are treated as “pass-through” entities, which means that the business itself doesn’t need to file its own separate tax return. Rather, the owners and/or members report income and losses on their individual returns.
At the state level, Massachusetts doesn’t impose a franchise or privilege tax on its LLCs. However, if your company maintains employees, it must pay a withholding or unemployment tax, and if it sells merchandise, it must pay a sales and/or use tax. You can register for these taxes online through MassTaxConnect.
It’s a little rarer, but if you’ve set up your LLC to be taxed as a corporation, it will be subject to an 8% corporate income tax and the Corporate Excise Tax.
What If I Don’t Pay?
Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
Failure to submit a required filing – most commonly an Annual Report – will land your LLC in “delinquent” status, and it’s not a fun place to be. It means that you’re out of good standing with the state and can no longer do things like foreign qualify in other states, apply for business loans, renew certain professional licenses, and more. Plus, if you fail to file two Annual Reports in a row, your LLC will be administratively dissolved and prohibited from doing business in the state until it reconciles its outstanding filings/fees and files for reinstatement.
And if you don’t pay any required taxes? You will be charged a penalty of 1% of the outstanding amount per month (up to 25%). In short, keeping up with your filings and fees will save you a lot of trouble, stress, and money in the future.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Massachusetts.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees – like Annual Reports and taxes – so your business doesn’t fall out of good standing.